A council has denied double standards after campaigning against payday lenders – while investing in one themselves.

Officials on South Tyneside voted last week to introduce a series of measures against the controversial firms who charge huge interest rates.

Action includes blocking access to their websites from council computers and lobbying to stop them setting up businesses in their area.

But the same council has £233,000 of its pension fund invested in shares in Wonga – one of the biggest payday lenders.

Council leader Allan West said legal regulations prevented the authority, which runs the pension fund on behalf of four other North East councils, cutting its “indirect” ties with Wonga.

He said: “Case law and local government pension scheme regulations specifically require the fund to seek the best possible return on its investments and only allow us to consider social and ethical issues when they have a financial impact.

“The Pension Fund has no direct investments in payday lenders, but does have a very small indirect holding via Pooled Investment Vehicles as part of its global private equity programme.”

Mr. West said the money invested in Wonga amounted to around 0.005 per cent of the pension fund’s total value.

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